What is the Capital Adequacy Ratio (CAR)?
The single most-watched safety number for a bank — what it measures, why the NBE sets a floor, and how to read it.
The Capital Adequacy Ratio measures how much of a bank's own money — its capital — stands behind the loans and other assets it holds. Think of it as the bank's cushion: when borrowers fail to repay, losses are absorbed by capital first, not by depositors' money.
How to read it
- CAR is expressed as a percentage: capital ÷ risk-weighted assets. Loans to riskier borrowers count more heavily than safe assets like central-bank reserves.
- A higher ratio means a bigger cushion. A bank with a CAR of 20% can absorb far heavier losses than one at 9% before depositors are at risk.
- A falling ratio over several years deserves attention even if the level is still adequate — it means the balance sheet is growing faster than the capital behind it.
The regulatory floor
The National Bank of Ethiopia (NBE) sets a minimum CAR that every commercial bank must maintain. Dropping below the floor is a serious supervisory event — on this platform it moves a bank's rule-based health indicator toward watch. The exact thresholds we apply are published, versioned, and visible on each sector dashboard and on the methodology page.
Where you see it here
- On a bank's profile, in Detailed mode, CAR appears as a gauge with the regulatory floor marked — along with ROE, ROA, NPL and liquidity ratios.
- In Simple mode, you don't need to read the ratio at all: the health indicator already incorporates it, computed mechanically from the published rule set — never judged by an AI.
Every CAR figure on this platform comes from the bank's own published disclosures, with the source document linked next to the number.